Re keeping it silent (until the big reveal), (and they are … except maybe for anyone who’s been courted?), I just re-discovered an entertaining tale of corporate ‘derring do’ that I had logged elsewhere;
It’s by Glenda Korporaal, about one of the most valuable lithium mines in the world , and was published in The Australian back in 2013.
It’s in the spoiler should anyone feel like some weekend reading on an exemplary company takeover deal a dozen years back that was described by insiders as "..a fast-paced and expertly executed allegro".
"WHAT is told into the ear of a man is often heard a hundred miles away" - Chinese proverb.
In August last year, Rockwood Holdings, an international chemical company listed on the New York Stock Exchange, made a $C724 million offer for Perth-based lithium miner Talison Holdings.
At $C6.50 a share, the offer was pitched well above the $C4 level at which Talison shares had been trading on the Toronto Stock Exchange. With no other buyer anticipated, the deal was expected to gain approval from Talison shareholders at a meeting in late November.
Rockwood's chairman and chief executive, Seifi Ghasemi, declared the deal was "the logical next step in further strengthening our lithium business ... [and would] enable us to better serve our existing global customers, as well as Talison's current customers in China and the rest of the world."
However, the unexpected announcement from Rockwood raised concerns thousands of kilometres away in China, where the privately owned Chengdu Tianqi was worried about the effect on its major lithium source - Talison's Greenbushes mine, about 100km to the east of Western Australia's Margaret River wine country.
Talison supplied about 90 per cent of Tianqi's lithium needs.
So the Chinese company turned to Andrew Low, a former Macquarie Group executive who had set up an advisory business, RedBridge, and later hired Macquarie colleagues Mark Dorney and Ashley Ozols (who became Low's right-hand man on the Talison negotiations).
RedBridge was then bought by Grant Samuel to form RedBridge Grant Samuel.
The events that ensued highlight a growing sophistication among Chinese companies when it comes to acquiring resources assets offshore, including in Australia, and set a new benchmark for speed and agility by a Chinese company in a competitive on-market bid.
Based in Chengdu, Tianqi specialises in products such as lithium carbonate, which is used to make batteries for the rapidly growing electric-car market. For more than a decade, it had been buying lithium from Talison, which had been boosting production in expectation of increasing demand from mobile phone and electric-car manufacturers.
"Tianqi was worried about its access to supply if Rockwood succeeded in buying Talison, as Rockwood would end up holding more than 50 per cent of the global market for lithium production," Low says.
Even though Talison's future seemed all but decided, Low flew to Chengdu to meet Tianqi executives.
Having headed Macquarie Capital's Asian business for six years, he knew well the complexities of doing deals in China. He began quietly buying up shares in Talison to secure a seat at the table for his client.
It was to his advantage that, for historical reasons, Talison was listed in Toronto. Here in Australia, investors must declare themselves substantial shareholders once they hold more than 5 per cent of a company. On the Toronto exchange, the disclosure level is 10 per cent.
Low recalls a crucial weekend - November 10-11 - when he had bought almost 10 per cent of Talison and was about to go higher.
"The most exciting part of the deal was the weekend just before we came over the parapet. There were only two weeks to go before the shareholder meeting and it was time to reveal ourselves. But it all had to be timed exactly."a
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They had been avoiding Talison's three major shareholders - Goldman Sachs, Fortress and Noonday - for fear of tipping them off, but now had to act quickly.
They contacted the trio in an effort to pick up more stock, but encountered unexpected obstacles, including that two had already sold their stakes.
"We rang Goldman Sachs," Low says, "but they had sold to arbs [arbitrage investors]. We rang Fortress. They also had nothing left. The last strike was Noonday. They still had stock, but were in no hurry to sell."
Low and his team flew to Perth, where they planned to meet representatives of Talison's management, inform them Tianqi had become a major shareholder and declare their interest in countering the Rockwood proposal with a higher offer.
Late on the Sunday afternoon, after finally getting Noonday to agree to sell its shares, Low rang Talison adviser Michael Ashforth, a former Macquarie colleague of Low's, and told him his clients wanted a meeting.
By the way, he told Ashforth, the Chinese company was now holding almost 20 per cent of Talison. Just as importantly, it had approval from all the Chinese regulators (the National Development Reform Commission, Ministry of Commerce and the State Administration of Foreign Exchange) to make a counter-offer.
"That took them by surprise," Low says. "It laid the groundwork to postpone the Rockwood deal and negotiate with us."
Owning almost 20 per cent of Talison gave Tianqi a seat at the table, but did not guarantee a deal. Talison had what seemed a perfectly good bird in the hand with the offer from a US company that had its financing in place.
Chinese companies are notorious for being slow-moving and bureaucratic. Deals involving them must also run a gauntlet of regulators in China and abroad, potentially holding things up for months.
That process has made Western companies wary. So Talison's board was right to be concerned that Tianqi might not be able to move with the speed of a Western bidder and that its financing might not be in place in time.
Representatives from both sides met a few weeks later in Singapore, half-way between Talison's Perth headquarters and Tianqi's base in Chengdu, perhaps best known as the home of giant pandas and spicy Sichuan hotpot. Low and his team camped out at the Fullerton Bay Hotel, down the road from Macquarie's Marina Bay offices.
Both sides shuttled back and forth until they had reached a deal Talison chairman Peter Robinson felt he could take to the board. The Chinese company would offer $C7.50 a share and it would also be up for a reverse break fee of $C25 million if the deal fell through or it was unable to raise the money.
And so, on December 6, Tianqi announced a friendly deal valuing Talison at $C848 million, clearly outbidding Rockwood. But the pressure was still on the Chinese company to show that it had the money before Talison shareholders met to approve the deal in February.
From the humid heat of Singapore, Low's team moved to the cold of winter in Beijing, staying at the China World Hotel, where they pulled together the financing and spoke to the all-important Chinese regulators.
Low and his team negotiated for Leader Investment Corporation, a subsidiary of China Investment Corporation, to pay $C300 million for a 35 per cent share in Tianqi subsidiary Windfield, which was making the Talison offer.
The deal meant approval would be needed from Australian regulators.
But the financing for this part of the deal took longer than expected, requiring bridging finance - $US200 million from Credit Suisse, $US120 million from Industrial and Commercial Bank of China and another $US50 million from a debt fund managed by ADM Capital in Hong Kong. Then they needed approvals from Australia's Foreign Investment Review Board.
Finally, as the February deadline neared, all Tianqi's ducks were in a row.
Talison shareholders voted overwhelmingly for the deal. Six months after Low's team had started buying Talison shares, the miner was delisted in Toronto. It is now Chinese-owned.
"[The deal sets] a new benchmark for Chinese bidders in the Australian market," Low says.
"It's the first time a privately owned Chinese company has been successful in a competitive public-market transaction, the first time that a Chinese bidder has obtained all the necessary Chinese regulatory approvals before making an offer for a listed company, and the first time that a Chinese company has offered a sizeable reverse break fee in order to demonstrate their confidence around financing."
In a published analysis of the deal, Corrs Chambers Westgarth special counsel Lizzie Knight and partner Stephanie Daveson were even more enthusiastic, calling it a "fast-paced and expertly executed allegro".
"Tianqi demonstrated astute appreciation for the M&A game in gazumping Rockwood Inc's existing offer by securing pre-bid stake leverage, obtaining majority shareholder support [and] the final [Chinese] regulatory approvals before executing the [implementation] agreement and offering reverse break fees as an upfront deposit payable into a trust account in Australia," they wrote.
"Tianqi has clearly demonstrated that PRC bidders can obtain final PRC approvals prior to going public."
After the deal was done, the non-executive directors of Talison, including the chairman, stepped down. The board now consists of two representatives from Tianqi, two from Talison's Australian management and one from the China Investment Corporation.
While the deal is done, the real test will be in how the new ownership structure works. "Tianqi is smart and has left the Australian managers in place," Low says. "They've made lots of visits to the mine to talk to staff and [there have been] trips back and forth by technical people to learn from each other."
Talison continues to increase its production, and Australian-listed Galaxy Resources, which also has Chinese investors, said in March that it would source lithium ore from Talison.
Low is looking forward to more such work. "With commodity prices and the Australian dollar both falling significantly this year, we have had many approaches from other Chinese private companies interested in doing similar deals in Australia."
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